Run-off chief says sector in imminent danger of collapse

The run-off sector is in imminent danger of collapse, according to Vaughan Buzzard, chairman of the UK's Association of Run-Off Professionals. "The increasing emphasis among insurers on capital risk management and underwriting discipline is having a devastating effect on our members' business," Buzzard told RISKbitz.

The run-off centre of the world

Buzzard says that fewer companies entering insolvency or exiting unprofitable lines of business means less work for run-off specialists. "The London market used to pride itself on the high level of insurer bankruptcies that kept companies like ours, not to mention hundreds of lawyers and accountants, in work," Buzzard said. "It is a disgrace that all this highly paid talent is in danger of being wasted."

Buzzard called on regulators to loosen supervision of the London insurance market before it was too late for the market's many beleagured run-off companies. "The run-off business represents thousands of jobs in the City," Buzzard said. "If the FSA doesn't act to allow more companies to underwrite themselves into administration, the run-off sector could be in serious trouble."

Buzzard said that run-off company bosses were also hoping that the onset of Solvency II would lead to more companies declaring themselves insolvent. "The run-off sector is the jewel in the crown of the London insurance market. Indeed, there are more companies in run-off than are active - and we want to keep it that way," Buzzard said. "But if the current alarming trend persists, with London market companies staying out of administration, the run-off sector itself will soon be placed into run-off."

"It's in everybody's interests but especially mine that the insurance industry gets back to basics ie shutting up shop," run-off lawyer Ian Schaden-Freud said. "No-one benefits from insurers not exiting lines of business - least of all the policyholder who would probably not have got his claims paid even if the insurer in question had stayed in business."